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Pork producer margins record sharp decline

Pork producer margins declined sharply last week, plummeting over $16 from a week earlier, according to Sterling Marketing, Vale, Ore. Producer margins have been under severe pressure from the effects of high corn prices ushered in by the summer’s drought- the worst since the 1950s.

Farrow-to-finish producers lost an average $41.65 per head for the week ending Nov. 23, according to John Nalivka, author of the Pork Profit Tracker report. The previous week’s report recorded losses of $24.77 per hog. One month ago, margins were in the red $1.96 per head while one year ago, producers lost $8.45 per head.

Last week’s marked decline came on the heels of industry reports indicating sow slaughter has been much lighter than many analysts expected, suggesting pork producers are anticipating higher hog prices by next spring. “Sow slaughter has certainly slowed since early October, falling far short of year-ago levels in three of the past four weeks for which actual slaughter data are available,” according to CME Group’s Daily Livestock Report.

Feed costs inched up from the prior week to $128.48 for hogs placed into finishing units as of Nov. 23. Hog prices for the week nosed down to $77.18 per hundredweight compared to $78.70 recorded the prior week.

Packer profits for the week ending Nov. 23, at $7.58 per head, remained nearly steady compared to $7.37 the week before. Sterling Marketing reports that for the same period in November 2011, packers were averaging a profit of $10.34 per head.

Cattle feedlot losses moderated for the week ending Nov. 23, coming in at -$67.07 per head compared to -$93.58 for the week earlier.

Beef packer margins showed a loss of $79.63 compared to a loss of $83.31 the week earlier, according to the Sterling report. One year ago, beef packer losses averaged $20.84 per head.

Sterling Marketing provides the Pork and Beef Profit Trackers, which are calculated using actual weekly prices for hogs and cattle, feed costs, pork and beef cutout prices as well as other factors that influence profit margins. The Pork and Beef Profit Trackers are produced by John Nalivka, president, Sterling Marketing, and are published weekly by Pork Network.